The already suffering Turkish economy experienced even more pressure amid the presidential election that took place in late May. Persistent political uncertainty sent the local currency and stock indices tumbling once again. Unfortunately, the Turkish lira has already seen many such falls. Following Erdogan’s election victory, the lira extended its slide together with Turkey’s benchmark BIST-100 index which tracks the performance of 100 major national companies. The Turkish currency has slumped below 20 against the US dollar, down from 19.3 just a month ago. Investors have been rapidly losing confidence in the local currency due to the high level of uncertainty that gripped markets after the first round of the election in Turkey. Two major candidates in Turkey's presidential race were Recep Tayyip Erdogan, who was eventually reelected in a runoff, and his main opponent, Kemal Kilicdaroglu. Markets were cautious with trading decisions while anticipating a possible shift in the economic policy of the country if the opposition leader had won. In this scenario, the new government could have probably stopped lowering the key rate to support a weakening lira. Meanwhile, Erdogan known for his unconventional view on the economy and interest rates is likely to pursue his previous policy of cutting rates. Such an approach has already resulted in the lira depreciating drastically in the past year and a half.
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